In the fiscal year ended March 31, 2011 (FY2010), Mazda turned in encouraging business results despite conditions of unusual adversity. As difficult external conditions lingered, including stubbornly high valuations for the Japanese yen against other major currencies, Mazda set out on multiple fronts to improve earnings. The Company strove to pare costs, bolster efficiency, expand sales in emerging countries, and improve compositions of vehicle types(vehicle mix) in these markets. Toward the end of the period, a major challenge arose in the form of the Great East Japan Earthquake, a catastrophe whose many deleterious effects included a drop in productive activity and a weakening in domestic consumer sentiment. Nevertheless, Mazda succeeded in bolstering both revenue and earnings under these adverse circumstances.
The directors expect the coming fiscal year, the fiscal year ending March 31, 2012 (FY2011), to continue to present an unforgiving business environment. Nonetheless, Mazda aims to uphold profitable operations on all fronts by accelerating forward-looking investments and taking steps to overcome the effects of the strong yen and rising costs of raw materials. On the product front, Mazda will usher in the first year of the SKYACTIV era by rolling out a succession of models equipped with the breakthrough SKYACTIV TECHNOLOGY, beginning with the facelifted Demio for the Japanese market. Additionally, Mazda will continue overhauling its cost profile through Monotsukuri Innovation and intensify its efforts in emerging countries. Through all these initiatives, Mazda will strive to achieve all of the targets in its medium- to long-term forecast.
The business environment in FY2010 was characterized by hopeful signs mingled with uncertainty. Overseas, economic growth in emerging markets, particularly in Asia, supported a steady recovering trend, yet uncertainty lingered due to political instability and rising oil prices. In Japan, a trend of production cutbacks, which had followed the cessation of the government's economic stimulus measures, halted as exports and production rose moderately and capital investment regained its footing. The overall environment remained persistently challenging, however, owing to continuing high valuations for the yen. The Mazda Group strove to improve earnings by pressing forward with cost trimming and streamlining efforts while expanding sales in emerging countries and improving its vehicle mix in these markets.
During the period under review, global sales volume and net sales each climbed 7% against the previous fiscal year, to 1,273,000 vehicles and 2,325.7 billion yen respectively. Operating income soared from the previous fiscal year, rising from 14.4 billion yen to 23.8 billion yen, while ordinary income improved from 32.2 billion yen to 36.9 billion yen, on the strength of growing volume and revenue in core markets. In net income, however, the Company incurred a loss of 60 billion yen, due to disaster losses from the Great East Japan Earthquake, extraordinary losses from appropriation of reserves against operating losses in North American affiliates, and a partial write-down of deferred tax assets. Free cash flow was positive for the full fiscal year at 1.6 billion yen.
The Company's dividend policy is to determine the dividend by taking into account the fiscal year's business results, as well as factors such as the prevailing management environment. The Company elected not to distribute a year-end dividend for FY2010, due to the incurring of a current net loss and in consideration of the status of its net assets.
Mazda has an array of strategies in place for driving growth in the near and medium term. In FY2011, the first year of the SKYACTIV era, the Company introduced to the Japanese market a facelifted Demio equipped with SKYACTIV-G, offering 10-15 mode fuel economy of 30 km/L. The latter half of the fiscal year will see the arrival of SKYACTIV-equipped Mazda3 models in North America and other major overseas markets, as well as a global rollout of the new CX-5 fully-equipped with SKYACTIV TECHNOLOGY. On June 17, 2011, in a joint venture with Sumitomo Corporation, Mazda announced the start of preparations for manufacturing in Mexico and sales operations in Brazil. Mazda views the Latin American region as the third pillar of its growth strategy, after China and ASEAN, and is pressing ahead to achieve growth in the near future.
In the year or so since Mazda announced its Framework for Medium- and Long-Term Initiatives last year, the management environment has changed dramatically. The external environment has deteriorated in many ways, with demand in developed countries increasingly uncertain, raw material prices rising precipitously, and the yen unfavorably high. Mazda is grappling with these challenges by introducing new-generation products, accelerating the introduction of Monotsukuri Innovation to improve costs, and forging ahead in emerging markets such as ASEAN. In its medium- to long-term forecast, Mazda aims to achieve a global sales volume of 1.7 million vehicles, an operating profit of 170 billion yen, and a return on sales (ROS) of 5% or more by the fiscal year ending March 31, 2016 (FY2015). Mazda is unwavering in this commitment and is moving resolutely forward to meet these targets.
